The Archive

The stock market is a jungle. It is an ecosystem that is unpredictable, dangerous, fascinating, rewarding (to some), and full of life. To navigate it successfully, you need a guide. To write this guide, we are going to take a one year journey through the stock market jungle. If you are interesting in beating the…

Imagine an investor equipped with a crystal ball in 1963—we will call her Cassandra. She would have looked forward five decades and seen some bizarre outcomes. She’d have seen that the best performing stocks would be mundane, boring food & beverage companies, cigarette makers, and insurers. The worst performing (and most volatile) would be stocks…

We know that our brains create heuristics—rules of thumb—which act as energy savers. Heuristics are our brains’ attempt to automate certain processes so that they can happen beneath our conscious awareness. Heuristics are a collection of behavioral algorithms in our brain. They are, for the most part, great. They help us efficiently navigate the world. But…

Beating the market very obviously requires performance that is different than the market, which in turn requires portfolio holdings that are themselves different from the market. “Active Share”–or the percent of your portfolio which does not overlap with your relevant market benchmark (say, the S&P 500 or the Russell 2000)–has become a buzz word in…

I’ve heard my friend Meb Faber say that investors have one of two psychological makeups: value or trend/momentum. These are two very different attitudes towards stocks and towards markets. When Ben Graham said, “The market is there to serve you, not to guide you!” he summed up the entire value philosophy. A momentum investor might…

There is a remarkable connection between two of my favorite thinkers—Peter Thiel and H.D. Thoreau. Each offers the same prescription for life, a prescription that we need more of today: Live (and think) at the frontier, on the edge of discovery, not in the cozy establishment. Favor radical discovery and exploration over incremental—and conventional—improvement. Free…

The U.S. market’s profit margin remains very high, but smaller stocks are suffering. While margins for the largest companies have remained well above their long-term averages, margins for the 40% of stocks in the market with smaller market caps have current margins well below their long-term average. This divergence highlights a broader key point: small caps provide…

Profit margins have been steadily rising for huge companies, but margins have been stagnant or falling for smaller companies. Clearly, the large are getting richer. But viewed a slightly different way we see an even more exaggerated trend: the rich are getting richer. Forget market cap for a moment. Instead of sorting stocks on their size…

Us humans have hardware and we have software. Our hardware (biology) evolves–very slowly–across generations. Our software (culture) evolves–very quickly–within generations. The difference in speed means that many aspects of our minds and bodies are vestigial: they we optimized for a very different environment than the one in which we find ourselves today. This helps explain why…

Companies need fewer and fewer employees to generate each dollar of profit. This trend is likely to continue. The best thing you can do is focus on areas which are less likely to be automated away: entrepreneurship, art, creation, ideas, and innovation. Let’s explore what is happening and what you can do about it. Martin…